More than a mathematical analysis of risks and returns determines the value of a share. It is also affected by how much the investment community knows and understands about the company concerned, and their perceptions of the quality of the firm’s management.
Hence to ensure that their shares are fairly valued, firms need to make every effort to ensure that investors and their advisors have recent frequent clear information about the firm’s situation and plans. The larger and more complex the firm, the more effort is required.
Investor Relations (Investor PR) Index
The Investor Relations (also known as Investor PR) index essentially acts as a multiplier on your company’s share price. So for a very simple example, if your Investor PR index is 1.1, then your Share price will be 10% higher than if your Investor PR index is 1.0 (assuming no other changes). In practice, by spending on Investor PR you will reduce your profit, which will be a drag on your share price, so the effect isn’t quite as simple as that.
In general, the larger your company, the more you need to spend to get a higher PR index. The maximum PR index possible is around 1.2, and you have to spend more and more to raise your index the closer you get to that limit.
How much should we invest in Investor PR?
Your best guide to how much to spend on Investor PR is to look at your current Investor PR index and spend, then decide how much more you are willing to spend on it to try to boost it. Keep in mind that if you spend too much on Investor Relations you may depress your Share Price by reducing your profit and earnings per share. Also decide whether or not there is another better use for the money spent on Investor Relations such as on Product Development.
The following are Smartsims product updates available from August 2018. Where product names are noted in the heading, that update only applies to these products.
This live resource enables users to find instant answers to their questions, as well as browse a wide range of help topics. The current articles available range from getting started, help with logging in and registration, through to guiding students on how to make decisions.
These figures on the Live Forecast update in real-time as students click “Apply” on any decision screen. This enables students to easily see the impact of individual decision changes on overall performance.
The figures can then be clicked to bring up the relevant forecast report in full. Previous figures remain in small font below.
The new Live Forecast feature will help students make more informed decisions and provide an immediate warning if they have made poor decisions.
Performance Star Ratings (MikesBikes Introduction & MikesBikes Advanced)
The bottom-left of the simulation interface now features a new gold star rating system:
The star rating students receive is based on their results from the previous year. A jump in Shareholder Value will result in an additional gold star achieved and vice-versa.
We hope this will further motivate students to improve their performance each year of the simulation.
Editing Product Names (All MikesBikes & Music2Go)
Previously, the name for the initial product has been computer generated (Adv1, Adv2, etc). Now through the Product screen students can edit their product’s name in the first year of the simulation:
Additionally, when students launch a new product, they can now edit the new product’s name at any time prior to the next rollover.
This live resource enables our simulation users to receive instant answers to their questions, as well as browse a wide range of help topics to guide them through their learning journey.
The Smartsims Support Center works on any device:
Browse decision areas such as Marketing, Operations, Finance; or specific decision periods:
And users can share their feedback on the help articles, enabling us to continue to improve content available through the knowledge-base:
Henry Ford is known for his innovative assembly line and American-made cars . Like many, he wasn’t an overnight success. His early businesses failed and left him broke five times before he founded the now successful Ford Motor Company. As they say,
Remember that life’s greatest lessons are usually learned at the worst times and from the worst mistakes.
Over the years, we have noticed the three common mistakes that students make in MikesBikes Intro and we want you to learn from these and how you can resolve them.
Three of the most common mistakes in MikesBikes Intro are:
Misunderstanding the Importance of Pricing Products Correctly
Inaccurate Sales Forecasts
Ineffective Spending in Operations
Mistake#1: Misunderstanding the Importance of Pricing Products Correctly
As Katherine Paine said, “The moment you make a mistake in pricing, you’re eating into your reputation or your profits.”
Price is usually a key determinant of demand and is the most critical component to maximizing your revenue. Therefore, carefully thinking about your Pricing strategy is important as this would have an impact on the demand for your products.
With a poor pricing strategy, you will be missing out on profits in every transaction that you make. View the “Market Summary Report”, in comparison to your competitors does your product have low Awareness, low Quality, low Distribution, or low Delivery (or all of the above)? If so you should price your product at the lower end of the market, if not and demand for your product is still average to high, then you can price your products at the higher end of the market. Keep in mind that extreme prices, high or low, will have a negative effect on Gross Margins.
There are several pricing methods, the most common of which are:
Mark-up: Fixed margin on costs
Target Return: Return/margin required by the company
Perceived Value: What the consumer is willing to pay
Going Rate: What is being charged in the market
These methods need to be in line with the overall marketing strategy. In addition, the retail price should be set by having regard for the price sensitivity of consumers and the prices of competitive products. This can be found in the Market Information Report (under the Key Reports menu).
Mistake# 2: Inaccurately Forecasting Sales
We have noticed two mistakes that students make in terms of forecasting sales:
Excessive Closing Inventory
Issues with Lost Sales due to lack of stock
Both of these scenarios are caused by inaccurately forecasting your firm’s sales for the year ahead. Ideally a firm would want to minimize this by correctly forecasting sales and adjusting your production based on this forecast (while also taking into account existing inventory levels).
There is a very helpful video available that demonstrates how to Forecast Sales within MikesBikes Introduction for new and existing products. Watch this here to learn how to Forecast your Sales accurately:
Mistake# 3: Ineffective Spending in Operations
Students often overspend or underspend in Operations and both have negative implications in their factory, its efficiency and the quality of their products.
There are three Operations decisions that you make in MikesBikes: Capacity, Efficiency and Quality.
Spending in these areas must be linked to your products and consumer preferences, some products require low Quality or high Delivery Time, whereas others revolve around Pricing and Advertising.
Capacity
Your Factory capacity is measured in Standard Capacity Units (SCU). The theoretical
capacity of a factory (in SCU) is calculated from the plant (machine) capacity and
the number and effectiveness of the workers.
For example, the standard Mountain bike requires 0.5 SCU to produce one
bike. If 500 SCU were available for production then the maximum output of
this design would be 500 SCU/0.5 SCU per unit = 1000 bikes (assuming zero idle
time and wastage).
Keep in mind that too much capacity relative to production/sales demand will result
in greater idle time (an inefficient use of resources causing higher average
manufacturing costs per bike). Also note that the maximum capacity you are able
to buy is set at the maximum amount of available cash you have for this year
before spending anything on any of your other budgets (decisions).
Capacity decisions should be made to accommodate your currently entered sales
forecasts and production decisions.
Efficiency
The Efficiency decision is used to enter the amount to be spent on reducing
wastage during production. Wastage relates to time spent on activities such as
setting up and maintenance of machines. In turn these activities act as a constraint
on production by absorbing a proportion (%) of the factory’s available capacity.
Note that increasing the size of your factory involves an increased Efficiency budget
to maintain your existing Efficiency level.
Quality
Quality refers to the satisfaction experienced by customers from a product and is an
important determinant of customer demand. It is measured in MikesBikes in terms
of the Quality Index which can be tracked on the Market Summary report.
Increasing the size of your factory involves an increased quality budget to maintain
your existing quality level. Before heavily investing in quality, consider your product
strategy as some segments are heavily sensitive to quality while others are not (if
you are planning to be a discount specialist then a large quality budget may be an
unnecessary expense, while if you are focusing on high end products they must be
produced to a high quality).
Conclusion
Every situation is unique within the simulation and these are only recommendations based on common mistakes we have found. As such there are no generalizations but this article will provide you with the tools to diagnose your unique situation and correct any problems you may be facing.
If you have any questions or would like to discuss anything further from what has been mentioned, please feel free to get in touch with us by clicking here.
We’re now halfway through the year and exciting developments are coming your way!
Improved Tablet and Mobile Experience
We understand that students have busy lives and are not always near their computer. So we have made it easier for them to check their results and update their decisions from their tablets and mobiles.
They can access all the same decisions and reports as they can on their desktop browser. However, we have adjusted the tablet/mobile screens to show the most relevant content, the reports and scrolling are better suited to smaller devices, and a ‘Hamburger’ style menu makes it easy to navigate.
Key Reports within Decision Screens
When students are making decisions, they often need to review one or more reports which means they often have to leave the decision screen. So we have added a commonly-used reports tab to each of the decision screens.
Selecting a report from the “Reports” tab will display the report as a pop-up over the top of the decision screen. This way students can quickly review key information and make an informed decision without having to leave the decision screen.
New Historical Reports Menu (MikesBikes Only)
We often receive emails from students requesting access to previous years’ reports. To make this accessible for students, we have now made historical reports available for them to access. This is available to them under the All Reports menu.
Accessibility and Improved Compatibility with Screen Readers
A key requirement for many institutions is accessibility for students with disabilities. Our simulations work with JAWS and NVDA, two of the most common screen readers, to help vision impaired students navigate their way around. We also provide additional context information for the screen readers in the input fields.
For instance, when you enter the Retail Price input field, the screen reader would announce: “Retail Price. Decision last year was $1600. Minimum Price is $1000. Maximum price is $3000.”
Similarly when you enter the Production input field you would hear: “Production Units. Decision last year was 15,000 units. Maximum production is 18,700 units”
This is of great benefit to vision impaired students as they do not have to hunt around for the information they need to make their decisions.
Updated Report Names
Updated report names for the following reports in MikesBikes Introduction, MikesBikes Advanced and Music2Go Marketing:
The Product Summary – Sales, Margin, Production has been shortened to Product Summary.
The Market Summary (All Product Details) has been shortened to Market Summary.
MikesBikes Advanced only: Financial Results for All Firms is now called the Industry Benchmark Report.
Our MikesBikes users will know the little dog which has featured in the simulation over the years. It is with sadness we have retired “Cliks” and “Einstein” the dog. This older style feature simply does not gel with our current updated simulation interface, nor the upcoming new interface under development.
If you are using MikesBikes Advanced your course will most likely feature a Final Double Rollover.
What is a Double Rollover?
A double rollover means that the simulation will rollover twice simultaneously. A Final Double Rollover ensures your final decisions leave their company in a healthy position for long-term success.
How should I plan for the Double Rollover?
You only need to enter your decisions once before the Final Double Rollover. All decisions will then be processed for the first rollover. For the second rollover most of your decisions will simply repeat, except for the following decisions which will not carry over:
Hire/Fire Workers
Buy/Sell Plant
Raise/Repurchase Equity
Raise/Repay Long-Term Debt
Product Development Decisions
Takeover and Owned Company Decisions (if applicable)
The following MikesBikes Advanced updates will apply to new courses starting from 1 July 2018.
1. Encouraging prudent product strategy
The current scenario enables students to develop as many new product development projects as they wish in a given year. Over time we have observed this can encourage some to undertake a very risky strategy where they rush to enter all new market segments in the first year of the simulation. Those who adopt this strategy often underestimate the significant expenditure required and put their company at a high risk of insolvency.
Our belief is that an “all or nothing” approach to start the simulation should be discouraged. Rather, our team feel it would best to encourage more prudent and realistic product strategies by limiting the number of product development projects to two per year. This means students can still have a product in every market if they wish, but by drawing this out over the first three/four years of the simulation it encourages a more strategic start to the simulation. However, if this update conflicts with how you would like to use the simulation we can disable this on request.
2. Limiting total number of products
Currently the scenario does not limit the total number of products in a company’s product range. We believe it is reasonable to limit the total number of products to five (in the Multi-Player). This encourages students to focus their efforts on fewer successful products, while at the same time creating greater opportunity for mid/low performing companies to improve. This number is still sufficient for students to have a product in every market if they wish. However, if you would like to increase the limit we can do this on request.
3. Final double rollover
Unless we have arranged with you otherwise, all MikesBikes Advanced courses we will now have a double final rollover (meaning the simulation will rollover twice simultaneously). This eliminates the possibility of “end game” decisions, aimed at a single year performance boost at the cost of long-term success. A final double rollover ensures student’s final decisions leave their company in a healthy position.
We are currently in the process of updating the simulation interface and as part of this process, the MikesBikes Dog will be replaced with a new way of giving students a quick indication of their firm’s health. As they say, some good things need to end for better things to begin.
As we bid farewell to the MikesBikes Dog, let’s look back and see how it was brought to life.
“Cliks”
In 1997-98, we were introduced to Cliks, the MikesBikes Advanced Dog.
The ‘smiley’ artwork in the original 1997 MikesBikes CD release was more of a simple Japanese cartoon style created by one of our programmers, James Saito.
Screenshot from the original 1997 release.
Around the same year, Dr. Pete Mazany, the founder of Smartsims hired Robert Chan as the graphic artist.
Robert then created the MikesBikes dogs as Pete Mazany loved dogs and always had at least a couple around the office.
We wanted a quick feedback indicator so students would immediately know how they were doing after a rollover, and the dog image was very well received. Students wanted to see what else the dog would do and it really helped with student engagement. It actually helps that the original style of the dog is fairly generic, but still endearing. Some people thought he was a bear, others though he was a goat. The success of the image is really in his facial expressions and the simple situations he is posed in.
“Einstein”
“Einstein the Dog” arrived soon after launch of MikesBikes Intro.
Nara Paz created Einstein the Dog as a ‘fresher’ re-imagining of the dog concept in 2006, and we integrated these into MikesBikes Intro soon after.
Although the MikesBikes Dog will be replaced, we will still retain its best elements: giving a quick indication of how the students are doing and providing them with something to look forward to seeing after every rollover.
Joe took the Introduction to Business course taught by Professor Josh Daines over at DMACC. He’s a 41 year old student and a father of 4 returning for a degree in Business Administration. He just graduated a degree in General Studies and got to share the experience of receiving his diploma alongside his wife and daughter in the same ceremony (see photo above). He is now currently working on his second degree.
He never won anything, except for an English contest when he was in 4th grade and a Renaissance Festival tickets last year, but now he managed to successfully land the Top position in the MikesBikes Intro Hall of Fame. This is such an incredible achievement!
We have interviewed Joe to learn about his journey on how he managed to achieve the top spot in the Hall of Fame, his experience and advice to future students.
Smartsims: What is your decision making process within the simulation?
Joe: This is actually the toughest question, I think, that you could ask. My decision making process started out simple, but as the rollovers continued, other factors began influencing my decisions. The first couple rollovers were straightforward: based on the advertising arc, which investments paid off the best? Then the additional product lines, how would the competition respond, what was the best allocation of funds outside of the advertising arc, etc.
Smartsims: What was your strategy going into the simulation?
Joe: I wanted to jump out to an early advantage, allocating funds where they would make the highest return. I wanted to maintain high revenues, high cash-on-hand, and minimize lost sales. I also figured the other firms would implement similar strategies, so I needed to be flexible yet maintain consistent growth. Once I began doubling my SHV every rollover, I focused more on my firm’s progress projections and less on the competition.
Smartsims: How did you begin implementing that strategy?
Joe: I knew the minimum SHV numbers that I wanted to hit at each rollover. I would run practice sim after practice sim until I found the right combination to get to that number. Once I did, I ran more sims to see if I could improve on it. Sometimes it worked, sometimes I made myself frustrated.
Smartsims: How did you familiarize yourself with the simulation?
Joe: I started by opening it up and trying everything. At the beginning of the semester, I did single-player simulations and failed spectacularly. I learned a little here and there, and with the help of some professors at DMACC, I was able to get a grasp on the program.
Smartsims: How would you describe the competition?
Joe: The competition was fun, above all else. The other firms made strategy implementation vital because I just didn’t know what they would do. It was a lot more fun with real people playing instead of just a computer with predictable moves.
Smartsims: What resources did you pull on to develop your winning strategy which led you to be a part of the MikesBikes Introduction Hall of Fame?
Joe: I utilized the Single-Player format first. After about a dozen practices, I had a solid opening strategy. I also talked to MikesBikes guru, DMACC’s own Professor Zarr as well as my Business teacher, Professor Daines, and asked a few questions. Without pointers from them, I wouldn’t have reached the numbers I did. I studied the interviews of previous winners, played around with different strategies, even ran rollovers where all I did was change a few dollars here or there to learn where the benchmarks were. I created my own spreadsheet that helped keep track of money allocations, allowing me to look back on what worked and what didn’t.
Smartsims: What challenges did you face? How did you overcome these?
Joe: At first, my numbers were right where I wanted them. Then, I started getting lost sales and I couldn’t figure out why. My numbers were exactly where I wanted them, and the results should have been predictable. I turned to the offline mode, and it was a life-saver. I strongly suggest anyone in multi-player competitions use the offline mode. It will not predict your opponents’ moves, but it will help you figure out your own.
Smartsims: Was there anything in particular you did that you think helped to prepare yourself?
Joe: I obsessed over this simulation. It wasn’t healthy. I talked about it, I played it, I thought of new strategies while walking around Disney World. My kids rolled their eyes when I would bring it up.
Smartsims: How has participating within a course which uses a business simulation to supplement their teaching materials helped you? What do you think of the business simulation?
Joe: I really liked the sim as part of the curriculum. I mentioned that to the professor during the class review. Learning about the Advertising Mix as well as the Promotion Mix helped understand the importance of allocating funds to specific areas within the sim. Studying it, then putting it into direct action was really a cool experience. I really enjoyed having Mike’s Bikes as part of the class.
